Financial Statements

Question 1

Balance Sheet Current Assets

Answer 1

Cash
Accounts Receivable Net
- Reclassification of O/S Receivables

Question 2

Balance Sheet Assets

Answer 2

Cash
Accounts Receivable
Property, Plant and Equipment 
Accumulated Depreciation
Goodwill

Question 3

Retained Earnings Calculation

Answer 3

Revenues - Expenses
(Income Taxes)
= Net Income
\+ Retained Earnings 1/1
= Current Retained Earnings

Question 4

What is the Balance Sheet?

Answer 4

Statement of Financial Position, Measured at one point in time.
Assets = Liabilities + Equity = Contra and Adjunct accounts

Question 5

Measurement Attributes

Answer 5

Historical Cost 
Amortized Historical Cost 
Fair Market Value 
Net Realizable Value
Present Value

Question 6

How do you determine Gross Profit

Answer 6

Sales - Cost of Goods Sold

Question 7

How to find cost of goods?

Answer 7

?
+ Finished Goods Beginning
- Finished Goods Ending
= Cost of Sales

Question 8

Why use a Multi Step Income Statment

Answer 8

Provides a more meaningful presentation of revenue and expenses

Question 9

What happens in a Multi Step Income Statment

Answer 9

Gross Profit
Operating Profit
and Pretax Income from Continuing Operations are Determined.

The focus is on the determination of operating profit rather than simply income from continuing operations.

Question 10

Multi-Step Income Statement Format

Answer 10

Sales 
\+ COGS 
= Gross Profit
\+ Operating Expense 
\+/- Other Income Expenses
= Income from Continuing Operations before Tax 
\+ Income Taxes
=Income from Conti. Operations 
\+/- Discontinued Operations
= Net Income

Question 11

Purpose of comprehensive income

Answer 11

To show all changes in equity, including changes that currently are not a required part of net income.

Question 12

What does comprehensive income reflect

Answer 12

All changes from owner and non-owner sources.
Other comprehensive income items are: unrealized G/L on AFS securities, unrealized G/L on pension costs, foreign currency translations adjustments, and unrealized G/L on certain derivative transactions.

Question 13

What is Comprehensive Income

Answer 13

it is the sum of net income and other comprehensive income.

Question 14

What are the possible items of other comprehensive income

Answer 14

Minimum additional pension liability adjustment
unrealized gains and losses on investments classified as available for sale
gains and losses resulting fro translating financial statements expressed in a foreign currency and related hedges
gains and losses on the effective portion of cash flow hedge

Question 15

Comprehensive Income is reported as

Answer 15

Separate Statement of Comprehensive Income

or Combined with the Income Statement to provide a Statement of Net Income and Comprehensive Income

Question 16

Statement of Changes in Equity

Answer 16

Reconciles all of the beginning and ending balances in the equity accounts. The statement shows the opening balance then details all changes in the accounts ending with the closing balance.
Following Items shown: 
Stock
APIC
Retained Earnings
Treasury Stock 
AOCI

Question 17

Cash Flow per share is

Answer 17

specifically prohibited from being disclosed unless it is based on contractual amounts.

Question 18

Operating Activities come from adjustments to reconcile net income to net cash flows and through analyzing the change in current assets and liabilities accounts:

Answer 18

Net Income - Increase In inventory - Decrease in Accounts Payable

Question 19

Operating Activities Direct Method

Answer 19

Cash Inflows:
From Customers
Interest Income or Dividend Income
Sale of trading Investments
Cash Outflows: 
To suppliers
To Employees
To Government 
For interest or other operational expenses

Question 20

Investing Activities

Answer 20

Cash Inflows:
Sale of Property, Plant or Equipment
Sale of Debt or Equity securities of other entities
Collection of Loan Principal
Cash OutFlows:
Purchase of Property, Plant or Equipment
Purchase of debt or equity securities of other entities

Question 21

Financing Activities

Answer 21

Cash Inflows:
From sale of equity securities 
From Issuance of Debt (Bonds and Notes)
Cash Outflows:
To Stockholders as dividends 
To redeem long term debt
To Re-Acquire Capital Stock

Question 22

Reconciliation of Change in Cash

Answer 22

Net Increase (or Decrease) in Cash and Equivalents (during X2) + Beginning Cash and Equivalents = Ending Cash and Equivalents

Question 23

Operating Activities Direct Method

Answer 23

This method directly shows the amount of cash inflows and outflows from operations. It shows cash received from sales and cash paid in operations

Question 24

Operating Activities Indirect Method

Answer 24

This method is a reconciliation of the accrual based net income to derive cash flows from operations.

Question 25

Formula to determine cost of goods sold from cash payments

Answer 25

Change in liabilities + change in equity - change in other assets

Question 26

Net cash provided by operating activites

Answer 26

Net Income
(Increase in Inventory)
(Decrease in AP/Accrued Liabilities)
(Gain on Sale of Long Term Investments)
(Increase in short term investments)
Depreciation Expense 
= Net operating cash inflow

Question 27

Basic Financial Statement Disclosures

Answer 27

Summary of Significant Accounting Policies 
Related Party Transactions
 Liability Disclosures 
Capital Structure 
Errors and Irregularities 
Illegal Acts